Question
On January 1, 2020, John Doe Enterprises (JDE) acquired a 55% interest in Bubba Manufacturing, Inc. (BMI). JDE paid for the transaction with $3 million
On January 1, 2020, John Doe Enterprises (JDE) acquired a 55% interest in Bubba Manufacturing, Inc. (BMI). JDE paid for the transaction with $3 million cash and 500,000 shares of JDE common stock (par value $1.00 per share). At the time of the acquisition, BMI's book value was $16,970,000.
On January 1, JDE stock had a market value of $14.90 per share and there was no control premium in this transaction. Any consideration transferred over book value is assigned to goodwill. BMI had the following balances on January 1, 2020.
Book | Fair | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Value | Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Land | $1,700,000 | $2,550,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Buildings (seven-year remaining life) | 2,700,000 | 3,400,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equipment (five-year remaining life) **CALCULATE THE NCI** The following account balances are for the year ending December 31, 2020 for both companies.
| 3,700,000 | 3,300,000 |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started